Navigating Car Insurance Terms and Definitions

Common insurance terms are about to get much easier to understand. Just browse through the following words! This glossary can help you understand and choose car insurance coverage. While every state has a minimum level of required coverage, there are plenty of insurance options if you're looking for additional protection for you, your family, and your car. This little insurance dictionary can also help you understand your current coverage benefits, how to file a claim, and what it's like to interact with an insurance company.

A

Actual Cash Value (ACV): You'll hear this term if your car is totaled in an accident. According to the International Risk Management Institute, ACV is the amount of money an insurer will pay in the event of a loss (you total your car).  Your car's actual cash value takes into account the price of your car when you purchased it, as well as the age and condition it's in at the time of the accident.

Accidental Death Coverage: This is an optional car insurance coverage. If you add Accidental Death to your auto policy, your beneficiary as defined in the policy will receive a specific dollar amount as a benefit if you were to die as a result of a covered accident in your car.

B

Bodily Injury Liability Coverage: Bodily Injury Liability is part of most states' minimum auto insurance requirements. If you are liable for injury to another person as a result of a car accident, your Bodily Injury Liability Coverage will help pay for their medical expenses and, if needed, help pay for your legal services.

C

Claim: An insurance claim is a request you make to your insurance company for compensation or coverage for a covered loss. (You accidentally rear-end another driver, then you file a claim with your insurance company!)

Collision Coverage: Collision insurance pays to repair or replace your vehicle if it's damaged in a collision, regardless of who is at fault. It is not required by law and is not part of liability-only car insurance.

Combined Single Limit: Some insurance companies will offer different "limits" for Bodily Injury Liability and Property Damage Liability. A limit is the greatest amount of money your car insurance company will pay if you need to use your coverage.

Instead of offering different limits for Bodily Injury and Property Damage, some insurance companies will offer one liability limit, dubbed a combined single limit, that covers both Bodily Injury and Property Damage Claims. Combined single limits are more common for commercial auto insurance policies.

Comprehensive Coverage: Comprehensive Coverage helps protect your vehicle from damages that occur in an event other than a collision. If your car is stolen, vandalized, or damaged by a natural disaster, contact with an animal, or by any other covered incident, your comprehensive insurance coverage will help pay for repairs or replacement.

D

Declarations Page: The Declaration Page shows the specific policy detail for the individual insured, such as: the name and address of the insurer, the Named Insured and producing agent; the policy period, the property (vehicles) insured; the coverages, deductibles and premiums charged; other drivers and excluded drivers; policy and endorsement forms that are applicable to the policy.

Deductible: A deductible is a set amount of money, determined in your car insurance policy, that you will have to pay in the event of a claim before your insurance takes care of additional costs.

DL123: A DL123 is specific to North Carolina. The Form DL-123 proves to the North Carolina Division of Motor Vehicles that you have at least the minimum amount of liability car insurance required to drive a vehicle registered in North Carolina.

Down Payment: If you choose to pay your insurance premium on an installment plan (instead of paying the full premium up front) a down payment is generally required to get your car insurance policy started. Down payments vary depending on your state, individual policy, and company guidelines.

E

Endorsement: An endorsement is an amendment or rider to a policy that adjusts the coverage for the individual insured or otherwise changes the general contract terms. For example, if you decide to add or delete a vehicle or driver after your policy was bound, you, either directly online or through your insurance agent, would make an endorsement to your policy.

Excluded Driver: An excluded driver is a person or persons who you specifically designate will not be covered at any time while driving your vehicle—even if they end up driving your car in the event of an emergency. By excluding them from your policy, you are formally acknowledging that they will not drive your car and your car insurance company will rate your policy accordingly.

F

FR-44: Only Virginia and Florida use FR44s. An FR44 is sometimes called "DUI insurance," but it's not a type of insurance. An FR44 is a certificate verifying insurance coverage that meets the state's applicable requirements for financial responsibility. An FR44 is required when a person is applying to reinstate their driver's license following a DUI or DWI conviction.

G

Graduated Driver's License: Every state has a three-stage Graduated Driver Licensing (GDL) program that allows young drivers to gain driving skills in a safe, supervised way. When followed, these programs help prepare a teen driver for whatever the road throws their way. Program requirements vary by state.

L

Lapse: A lapse in coverage happens when your insurance terminates, for example if you don't pay the required premium. If you drive with a lapse, then you're driving without car insurance and the consequences could be costly! Think fines, potential jail time, and maybe a suspended driver's license.

Liability Car Insurance: Liability only insurance generally refers to the most basic level of coverage that you can purchase for your vehicle: Property Damage and Bodily Injury Liability. There is a minimum amount of liability car insurance coverage required by law in almost every state.

M

Medical Payments Coverage (Med Pay): Med Pay is a type of coverage that can help you pay for medical expenses in the event of an auto accident. It's optional and can help pay for medical, hospital, and funeral expenses incurred by you and those insured under your policy, regardless of who is at fault for the accident.

Mexico Auto Insurance: If you drive from the U.S. into Mexico, you'll want to learn more about Mexico Auto Insurance. The same auto policy that keeps you legal in the U.S. won't cover you in Mexico. With Mexico Auto Insurance coverage, you can be better protected in the event of an auto accident on the other side of the border.

Minimum Auto Insurance: Minimum auto insurance also referred to as “minimum limits” is the least amount of insurance coverage you can have while still meeting your state's mandatory car insurance liability laws.

Motor Vehicle Report: Your state's Department of Motor Vehicles maintains information on licensed drivers and registered vehicles. An MVR could include your driver's license information, your points history, driving violations, and convictions. To help evaluate you as a risk and determine the your rates, car insurance companies will look at your motor vehicle report (MVR), or driving history. .

N

No-Fault Insurance: No-fault, or PIP coverage, is a type of car insurance coverage that can help pay for specific medical, hospital, and funeral expenses that result from a car accident —regardless of who is at fault. No-fault insurance is not offered in all states. It is also called personal injury protection (PIP) insurance.

No-Loss Statement: If your insurance policy has been canceled you may want to try to reinstate the policy without a lapse in coverage. If so, you'll probably be asked to sign a no-loss statement. A no-loss statement is a statement signed by you in which you represent and promise that you have not had any loss or claim (either liability or property damage) between the time your policy canceled and the time you're applying for reinstatement (your “lapse period”).

P

Personal Injury Protection (PIP): PIP coverage or no-fault insurance, is a type of car insurance coverage that can help pay for specific medical, hospital, and funeral expenses that result from a car accident—regardless of who is at fault.

Property Damage Liability Coverage: Property Damage Liability pays for your legal responsibility should you cause property damage while operating your vehicle. This coverage does not pay for repairs to your vehicle.

R

Rental Reimbursement: Rental reimbursement coverage will help reimburse you for the cost of a rental car if your vehicle can't be driven due to a covered accident or loss. This car insurance coverage is optional, and can typically only be purchased if you also purchase Comprehensive and Collision coverage.

S

SR-22: "SR" stands for "safety responsibility." SR-22 isn't a type of auto insurance. It's a document that an auto insurance company files with the state to certify that an individual has an insurance policy in place that meets that state's minimum liability coverage or financial responsibility requirements. An SR-22 is usually required if you've been convicted of a DUI/DWI; have failed to maintain car insurance in the past; or you've committed serious driving-related violations.

T

Towing and Labor: Towing and Labor is an optional coverage. It covers or reimburses you for emergency towing costs (up to the limit selected) when your covered vehicle cannot be driven due to a mechanical breakdown or an accident and for labor costs for necessary services provided at the place where your car is disabled. Typically, it can only be purchased if you also purchase Comprehensive and Collision coverage

U

Underinsured Motorist Coverage: This is a policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Uninsured Motorist Coverage: If you're in a car accident and the at-fault driver does not have liability insurance or cannot be identified, this coverage would help pay for medical and related expenses that you incur. In some states, In some states where “underinsured motorist coverage” is not defined separately, Uninsured Motorist Coverage will also help pay for expenses if the at-fault driver has insurance, but not a sufficient amount to cover your auto insurance claim.

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